The central bank of Uganda cuts the main loan rate again

The central bank of Uganda lowered its key lending rate (UGCBIR=ECI) by 25 basis points on Monday, the second time in a row. It is now at 9.75%, and the bank said that inflation would likely stay below its goal in the near future.

In September, year-on-year inflation fell to 3.0% (UGCPIY=ECI), which is less than the central bank’s medium-term goal of 5%.

Central Bank Deputy Governor Michael Atingi-Ego told a news conference, “The MPC… assesses that inflation is expected to remain below the target in the near term and that the risks to inflation are balanced.” He also said, “The MPC acknowledges the inherent uncertainty in the outlook, which warrants a cautious monetary policy.”

“The easing of the monetary policy is necessary to keep inflation on track while supporting social economic transformation,” he added.

In late February, Uganda’s shilling hit a record low against the dollar. It has since recovered, though, and is now 3% better against the dollar for the year.

Atingi-Ego said that part of the reason why inflation has been slowly going down over the past few months is because of smart monetary policy that has kept prices stable while allowing growth to resume.

“Inflation has remained subdued, which is basically reflecting the unwinding of the global shocks, a stable shilling exchange rate, partly due to the strong coffee export receipts, and… the moderate growth in imports,” he noted.

In August, the rate fell to 10% by the central bank.

Atingi-Ego said that Uganda’s economy would grow by 6.5 to 7% in the fiscal year that began in July 2024/25 and by 7 percent after that.

“The growth trajectory is underpinned by strategic government interventions, an increase in foreign direct investment in the extractive industry, and the commencement of oil production in the financial year 2025-26,” said the man.